Is political unrest taking a toll on Israeli startups?

Now that the first half of 2023 is officially behind us, we are going to get a flurry of data on VC investment around the world. This will allow us to paint a global picture, but also to zoom in on countries where specific factors might be at play.

Today, we are looking at Israel by way of a new report from Israeli VC firm Viola. It offers data on how much capital Israeli startups raised in H1 and how that compares to previous years. But its authors also venture a few hypotheses on the reasons behind this decline.

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Both on my mind and on Viola’s, of course, is the political crisis Israel finds itself in since the beginning of 2023.

After the Netanyahu government announced its intent to overhaul the country’s judicial system and balance of powers, a series of anti-government protests have continued across the country.

Israel’s tech ecosystem didn’t stay out of the political unrest; entrepreneurs and investors have become key players behind anti-government protests. And more generally, concerns have emerged on the damage that could be done to the country’s economy, of which the tech sector accounts for a significant part.

With this in mind, let’s look at the data compiled by Viola to see how VC investment into Israel fared this year so far — unfavorably — and what might explain its decline.

It’s not looking good

With a provisional tally of $3.2 billion for the first half of the year, funding activity in Israel dropped by 73% compared to the same period in 2022, IVC data shows.

Pitchbook data interpreted by Viola reveals a 50% year-on-year decline globally, meaning that Israel fared worse than the rest of the world. And $3.2 billion is also less than Israeli tallies in years prior to 2022.

Is political unrest taking a toll on Israeli startups? by Anna Heim originally published on TechCrunch